An exploratory study to understand the
challenges encountered by Irish charities
with implementing good governance
standards.
A dissertation submitted to the National College of Ireland in partial fulfilment
of a MSc in Management
By: Noel O’Connor
Submitted to the National College of Ireland
21st August 2019
i
Abstract
While there is a significant amount of literature available in the area of
governance and regulation for commercial entities, this is a relatively new topic
in terms of charities, not for profits or the ‘third sector’. This thesis has
identified some of the key themes that have emerged within the literature as a
result of enhanced regulatory obligations or a change in public expectations.
The factors leading to variations in governance practices are discussed within
the context of the identified governance frameworks and a view is formed on
what the key governance challenges are for Irish charities following the
introduction of formal regulation.
The researcher engaged a qualitative approach to gather information through
semi-structured interviews with nine participants. All participants have current
senior roles in the charity sector as senior management of incorporated
charities, consultants or advocates/regulators. A focus group was then
conducted with seven Regional Managers (CEO equivalent) who are the most
senior employees within their respective incorporated charities. Each are
leading an individual charitable entity (CLG) with the same objects, but in
different areas of Ireland. The purpose of the interviews was to elicit
information from senior professionals within the ‘third sector’ regarding their
experience of governance issues, while the purpose of the focus group was to
facilitate a discussion between senior professionals from within the same
network of charitable companies on the findings from the individual interviews.
The results of the research showed a clear willingness to comply with the new
regulatory obligations that charities have. There is no indication that
organisations are not willing to comply or operate to the highest governance
standards but there are clearly challenges facing the sector. The challenges
facing organisations are outlined along with a commentary regarding how
better management and the creation of a balanced agenda of compliance with
the expected governance standards, and service delivery will result in well-run
organisations and lead to better services for the end user.
ii
This thesis discusses considerations for charities when deciding on their
governance model and highlights how a hybrid of existing theoretical
frameworks may be appropriate for implementation within the sector.
This thesis excludes any consideration of public service health and education
organisations that are registered as charities by virtue of the fact that they held
Revenue CHY numbers prior to the establishment of the Charities Regulatory
Authority.
iii
Declaration Form
National College of Ireland
Research Students Declaration Form
(Thesis/Author Declaration Form)
Name: Noel O’Connor
Student Number: X16145461
Degree for which thesis is submitted: MSc in Management
Material submitted for award
(a) I declare that the work has been composed by myself.
(b) I declare that all verbatim extracts contained in the thesis have been
distinguished by quotation marks and the sources of information
specifically acknowledged.
(c) My thesis will be included in electronic format in the College Institutional
Repository TRAP (thesis reports and projects)
(d) Either *I declare that no material contained in the thesis has been used
in any other submission for an academic award.
Signature of research student:
Date: 21st August 2019
iv
Submission Form
Submission of Thesis to Norma Smurfit Library, National College of
Ireland
Student name: Noel O'Connor Student Number: X16145461
School: School of Business Course: MSc in Management
Degree to be awarded: MSc in Management
Title of Thesis: An exploratory study to understand the challenges
encountered by Irish charities with implementing good
governance standards.
One hard bound copy of your thesis will be lodged in the Norma Smurfit Library
and will be available for consultation. The electronic copy will be accessible in
TRAP (http://trap.ncirl.ie/), the National College of Ireland’s Institutional
Repository. In accordance with normal academic library practice all thesis
lodged in the National College of Ireland Institutional Repository (TRAP) are
made available on open access.
I agree to a hard-bound copy of my thesis being available for consultation in
the library. I also agree to an electronic copy of my thesis being made publicly
available on the National College of Ireland’s Institutional Repository TRAP.
Signature of Candidate:
For completion by the School:
The aforementioned thesis was received by: __________________________
Date: _______________
v
Acknowledgements
I would like to acknowledge and thank the following people who have
supported me in completing my MSc in Management:
Margaret Darcy, my supervisor for this dissertation, for her assistance,
support and guidance.
The academic staff and my fellow students in the National College of
Ireland who provided wonderful support over the duration of this MSc
programme.
Those who participated in the study and gave so generously of their
time, experience and expertise.
My friends and family for all their encouragement and support.
I dedicate this dissertation to my wife, Orla, and son, Tom, who have, with
their love and support, encouraged, motivated and shown tremendous
patience to enable me to complete this programme over the last two years.
vi
Table of Contents
Abstract i
Declaration Form iii
Submission Form iv
Acknowledgements v
Table of Contents vi
List of Tables x
List of Figures xi
List of Appendices xii
List of Abbreviations xiii
Chapter 1 – Introduction 1
1.1 – Introduction 1
1.2 – Charities Regulation 1
1.3 – Aim of Thesis 3
1.4 – Rationale 3
1.5 – Thesis Structure 3
Chapter 2 – Literature Review 5
2.1 – Introduction 5
2.2 – What is Good Governance? 6
2.3 – Theoretical Framework 7
2.3.1 – Agency Theory 8
2.3.2 – Stewardship Theory 9
2.3.3 – Democratic Perspective 9
2.3.4 – Stakeholder Theory 10
2.3.5 – Resource Dependency Theory 10
2.3.6 – Managerial Hegemony Theory 10
2.3.7 – Theoretical Framework Conclusion 11
2.4 – Common Themes 11
2.4.1 – Transparency 12
vii
2.4.2 – Accountability 13
2.4.3 – Public Benefit 15
2.4.4 – Compliance 16
2.4.5 – Leadership 17
2.4.6 – Integrity 18
2.4.7 – Common Themes Conclusion 19
2.5 – Literature Review Conclusion 19
Chapter 3 – Research Question and Objectives 21
3.1 – Research Area 21
3.2 – Research Question 22
3.3 – Research Objectives 22
3.4 – Personal Motivation 23
Chapter 4 – Methodology 24
4.1 – Introduction 24
4.2 – Research Philosophy 24
4.3 – Research Approach 26
4.4 – Research Strategies 28
4.5 – Research Choices 30
4.6 – Time Horizons 32
4.7 – Sample 32
4.7.1 – Define the Sample 33
4.7.2 – Justification of Sample 34
4.7.3 – Selection of Sampling Strategy 35
4.7.4 – Source the Sample 35
4.8 – Pilot Testing 35
4.8.1 – Results from Pilot Testing 35
4.9 – Interview Structure & Procedure 36
4.10 – Focus Group 36
4.11 – Data Analysis 37
4.12 – Ethical Considerations 38
4.12.1 – Consent 38
4.12.2 – Anonymity 38
viii
Chapter 5 – Analysis and Findings 39
5.1 – Introduction 39
5.2 – Sub Question 1 39
5.2.1 – Sub Question 1A 39
5.2.2 – Sub Question 1B 41
5.2.3 – Sub Question 1C 41
5.2.4 – Sub Question 1D 42
5.3 – Sub Question 2 43
5.3.1 – Sub Question 2A 43
5.3.2 – Sub Question 2B 45
5.4 – Sub Question 3 46
5.4.1 – Sub Question 3A 46
5.4.2 – Sub Question 3B 47
5.5 – Sub Question 4 49
5.5.1 – Sub Question 4A 49
5.5.2 – Sub Question 4B 50
5.5.3 – Sub Question 4C 51
5.5.4 – Sub Question 4D 52
5.6 – Summary of Findings 53
Chapter 6 – Discussion 54
6.1 – Introduction 54
6.2 – Regulatory Implementation 54
6.3 – Variations in Governance Practice 56
6.4 – Organisational Performance 57
6.5 – Theoretical Framework 58
6.6 – Summary of Findings 61
Chapter 7 – Conclusion 62
7.1 – Recommendation 1 62
7.2 – Recommendation 2 63
7.3 – Recommendation 3 63
7.4 – Recommendation 4 63
7.5 – Recommendation 5 64
ix
Chapter 8 – Limitations 65
8.1 – Lack of Previous Research 65
8.2 – The Global View Taken of Irish Charities 65
8.3 – Time Constraints 65
8.4 – Personal Bias 66
8.5 – Focus Group 66
Chapter 9 – Recommendations for Further Study 67
References 68
Appendices 75
Appendix 1 – Charity Statistics Infographic 75
Appendix 2 – Research Participants 76
Appendix 3 – Pilot Interview Questions 78
Appendix 4 – Final Interview Questions 79
Appendix 5 – Focus Group Slides 81
Appendix 6 – Participants Information Sheet 84
Appendix 7 – Consent Form 87
x
List of Tables
Table 1: A comparison of governance theoretical frameworks. (Cornforth,
2005, pp. 24–25) 8
Table 2: Research strategies description 29
Table 3: Research Interview Schedule 34
Table 4: Suggested board actions to promote good governance. 51
Table 5: Publicly expected traits for board (ranked by importance). 52
xi
List of Figures
Figure 1: More frequently used techniques for generating and refining
research ideas (Saunders et al., 2009, p. 25) 21
Figure 2: The Research ‘Onion’ (Saunders et al., 2009) 24
Figure 3: Major differences between deductive and inductive approached to
research. (Saunders et al., 2009, p. 127) 27
Figure 4: An outline of the main steps of qualitative research. (Bryman,
2001, p. 267) 31
Figure 5: Robinsons four-point approach to qualitative sampling. (Robinson,
2014, p. 26) 33
Figure 6: CRA 2018 Annual Report Statistics 75
xii
List of Appendices
Appendix 1 – Charity Statistics Infographic
Appendix 2 – Research Participants
Appendix 3 – Pilot Interview Questions
Appendix 4 – Final Interview Questions
Appendix 5 – Focus Group Slides
Appendix 6 – Participants Information Sheet
Appendix 7 – Consent Form
xiii
List of Abbreviations
CEO Chief Executive Officer
CGC Charities Governance Code
CLG Company Limited by Guarantee
CRA Charities Regulatory Authority
CRO Companies Registration Office
DCYA Department of Children and Youth Affairs
FAI Football Association of Ireland
LGMA Local Government Management Agency
NYCI National Youth Council of Ireland
RBO Register of Beneficial Owners
SORP Statement of Recommended Practice
TAR Trustee Annual Report
TSO Third Sector Organisation
1
Chapter 1 – Introduction
1.1 – Introduction
This chapter provides the reader with a brief overview of charities regulation
in Ireland and then further describes how this thesis will discuss and comment
on the common themes and theoretical frameworks that have been identified.
The aim and rationale of this thesis will be introduced along with an
explanation of the structure of the document to guide the reader through the
information enclosed.
1.2 – Charities Regulation
(Cordery and Deguchi, 2018, p. 1334) citing Salmon (1987) note that “primarily
charities act to redistribute resources from donors and funders to beneficiaries
in order to repair market and government failures”. The position that these
organisations have in our society, providing such essential services, requires
a significant amount of trust to be placed in them by the public. Society
demands that the money and supports given to these organisations are
managed appropriately, to provide the best possible service for those that
need it. It is the job of the Charities Regulatory Authority (CRA) to be the
‘watchdog’ on behalf of the public to ensure charitable organisations are
complying with their statutory obligations.
Currently, according to MaGuire (2019) there are over 9,700 organisations on
the charity register in Ireland but there are a further 28,000 not for profit (NFP)
organisations. While the NFP organisations do not operate within the same
regulatory framework as registered charities, there remains a public
expectation that the business of these organisations is conducted with the
appropriate structures in place to ensure effective governance. This
expectation is evidenced by the announcement of Sport Ireland in June 2019
that is taking over the Governance Code for Community, Voluntary and
2
Charitable Organisations as a governance code for sport. This follows the
decision of the Governance Code Working Group to retire the Code of Practice
for Good Governance of Community, Voluntary and Charitable Organisations
in favour of the new mandatory Charity Regulator Governance Code. Sport
Ireland (2019) noted that it wished to ensure that all funded organisations have
appropriate governance structures in place.
The CRA was formed in Ireland in 2014 in accordance with the provisions in
the Charities Act 2009. While the initial stages of the formation were
essentially about the establishment of the structures and generating the
register of charities, the CRA has now started to be granted some of its other
powers established under the act, e.g. compulsory registration in 2016,
compulsory reporting and independent investigating, and so from 2017 we can
analyse a full year of regulatory reporting. According to the CRA (2019), the
number of charities on the register in 2018 was 9,799 and this marked a net
increase of 742 on the previous year. This is a growing sector that is moving
towards compliance with relatively new statutory obligations.
In recent years there have been a number of scandals that have featured in
media reports causing public outrage. Instances of poor governance practice
in the ‘third sector’ such as excessive CEO remuneration, undeclared conflict
of interests and poor financial reporting, which are, generally speaking, issues
of poor governance, have negatively impacted on the trust placed in charities
by society.
The introduction of the voluntary governance code in 2012, followed by the
compulsory code in 2018, while giving the organisations more of an
administrative burden, which may increase costs, are, according to Amárach
Research (2017) "seen to have three distinct advantages:
1. Build public trust;
2. Raise operating standards;
3. Create a climate of protection for Board members.”
3
1.3 – Aim of Thesis
Due to the fact that there is now an obligation for charities to comply with
statutory regulations, it is essential that an understanding is gained of what the
challenges are for those organisations to comply with these requirements.
This thesis aims to provide results that can be transferred into frameworks,
solutions or commentary for the challenges identified by charities regarding
the implementation of the regulations. While it is inarguable that organisations
should comply with the defined practices, it is beholden on the influencers
within the sector to work with the CRA to ensure that charities are not regulated
to extinction and that they can be supported to fulfil their obligations where
possible. This thesis will, I believe, identify solutions to the challenges faced
by organisations in this new regulatory environment.
1.4 – Rationale
Stone and Ostrower (2007) notes the existence of a gap between research in
governance, governance of non-profit organisations and the link between
public benefit. (McConville and Cordery, 2018, p. 13) further speak about the
regulatory models that are being suggested through research from “command
and control to new governance and market-based regulation”. These
discussions regarding the implementation of formal regulation need to
consider the challenges already being faced by organisations and how
regulation should be implemented in a proportional manner to achieve the final
aim of sectoral confidence.
1.5 – Thesis Structure
Chapter 1 provides an introduction to the topic and briefly discusses
the aim and rationale of the study.
4
Chapter 2 conducts a literature review and highlights the theoretical
frameworks and common themes that lead to the development of the
authors research objectives.
Chapter 3 defines the research questions and objectives of the study.
Chapter 4 discusses the methodology in detail. It comments on the
selection of a qualitative method, the use of semi-structured interviews
and a focus group.
Chapter 5 will outline the findings from the interviews and focus group
and will map these to each of the objectives.
Chapter 6 is a general discussion on how the authors findings compare
to areas highlighted from the literature review and on emerging issues
regarding the challenges that organisations are facing with complying
with their new obligations.
The Final Chapters provide a reflective space to consider the
conclusion, limitations, recommendations and further gaps warranting
research.
5
Chapter 2 – Literature Review
2.1 – Introduction
The literature review has been conducted as a desktop review of appropriate
literature relevant to the area of study. The review looks at governance
theoretical frameworks and then gives a detailed focus to a number of topics
that are of particular relevance when considering good governance of charities
and non-profit organisations.
The review has been carried out in a systematic manner and has been
conducted by a process that “gathers information on a subject or evidence to
support a hypothesis in order to contextualise research data” (Winchester and
Salji, 2016, p. 309).
The researcher identifies appropriate material from multiple sources. As well
as research conducted through the college supported channels and personal
contacts made from holding senior leadership positions within the sector for
over ten years, the researcher made direct contact with organisations that
regulate and support the ‘third sector’ in Ireland as well as reaching out to
published academics who are considered expert in the area of study.
Consideration was given to books from published authors in the subject of
charity regulation and/or governance, journal articles from research conducted
in related subjects and grey literature. (NYAM, 2009) defined grey literature,
as “That which is produced on all levels of government, academics, business
and industry in print and electronic formats, but which is not controlled by
commercial publishers". This has provided some important information for the
research through reports from the CRA, Benefacts and other appropriate Irish
charitable entities.
The themes emerging from the review of the current literature are
transparency, accountability, public benefit, compliance, leadership and
integrity.
6
2.2 – What is Good Governance?
While good governance can mean different things to different people, in
Ireland, both Pobal and the CRA have broadly the same definition. This is
probably unsurprising given that they are both government agencies with
statutory responsibility for working with, supporting and regulating
organisations delivering services to citizens through public entities or
charitable bodies.
The CRA (2018a) and (Pobal, 2018, p. 05) agree that good governance is the
“framework of structures, rules and processes by which organisations exercise
their formal power and responsibilities”. Good governance is essentially the
umbrella term for the rules, processes and policies that organisations,
regardless of their purpose, are operated and regulated. (Pobal, 2018, p. 05)
note the other important function that good governance seeks to achieve in
community, voluntary and not-for-profit organisations and that is “to ensure
that the organisation or group adheres to its purpose and serves the target
groups or communities for which it was set up to support”.
(Horan, 2019, p. 07), noted in the Governance Review Group report regarding
governance structures at the Football Association of Ireland (FAI), that
“governance comprises the arrangements put in place to ensure that the
organisation fulfils its overall purpose and achieves its intended outcomes for
all its stakeholders”. He further states that “governance is concerned with
leadership and direction, structures and authority levels, processes for
decision making, accountability arrangements, risk management, internal
controls, culture and related behaviours within the organisation”.
The common themes appearing from the definitions within an Irish context is
that governance is about the arrangements that are put in place by
organisations to realise their goals and that it is the responsibility of the
board/governing body, depending on the legal status of the organisation, to
ensure these arrangements are in place. Governance is a means to an end,
it is not a stand-alone concept, nor does it need to be overly complicated, but
7
it needs to be comprehensive and consistent. It is not about always making
the right decisions, but about having the best possible practices in place
for making those decisions.
2.3 – Theoretical Framework
(Cornforth, 2005, pp. 24 - 25) notes the common theoretical frameworks used
to explain organisational governance as outlined in the following table;
Theory Interests Board Members Board Role Model
Agency
Theory
‘Owners’ and
managers
have different
interests.
‘Owner/mandators’
representatives
Conformance:
Safeguard
‘Owners’ interests.
Oversee
Management.
Check
Compliance.
Compliance
model
Stewardship
Theory
‘Owners’ and
managers
share
interests.
Experts
Improve performance:
Add value to top
decisions/strategy
Partner/support
management
Partnership
model
Democratic
Perspective
Members/the
public contain
different
interests
‘Lay’
representatives
Political:
Represent
member
interests.
Make Policy.
Control executive.
Democratic
Model
Stakeholder
Theory
Stakeholders
have different
interests
Stakeholder
representatives
Political:
Balancing
stakeholder needs.
Make Policy.
Control executive.
Stakeholder
Model
8
Resource
Dependency
Theory
Stakeholders
and
organisation
have different
interests.
Chosen for
influence with key
stakeholders.
Boundary spanning:
Secure resources.
Stakeholder
relations.
External
Perspective.
Co-optation
Model
Managerial
Hegemony
Theory
‘Owners’ and
managers
have different
interests.
‘Owners’
representatives
Symbolic:
Ratify Decisions.
Give Legitimacy
(managers have
the real power).
‘Rubber
stamp’
Model
Table 1: A comparison of governance theoretical frameworks. (Cornforth, 2005, pp. 24–25)
While there is a view that the theory regarding non-profit organisations is
relatively underdeveloped, we can see from the development of the various
governance codes that the development of a new governance concept, taking
into account some of the principles of each of the aforementioned theories, is
warranted.
2.3.1 – Agency Theory
Agency theory, common in commercial enterprises, assumes that the owners
of the entity have different interests to those that manage it. Agency theory
supports the ‘controlling’ of management to ensure that they are acting in the
best interests of the organisation. This behaviour highlights the need for
directors to be completely independent of management so as to ensure
managerial compliance. The difficulty with applying this theory in practice is
that in non-profits, it can be difficult to determine who the ‘owners’ are. They
can be considered to be the board, the members, funders, or those who
access the services.
9
2.3.2 – Stewardship Theory
According to Coule (2015), stewardship theory assumes owners (board
members) and managers share interests. This is common in membership
organisations where board members are appointed to positions by virtue of
the skills that they add to the board thus adding value to the strategic decision-
making process. Organisations need to ensure that appropriate skills matrices
are in place to determine the most suitable board members so that this
‘partnership model’ can work well and yield positive results for the organisation.
Boards operating in this framework need to exercise care that this does not
lead to the power and control being held by longstanding members for long
periods of time thus not achieving an appropriate level of ‘board rotation’ and
a possible ‘group think’ situation.
2.3.3 – Democratic Perspective
The democratic model, as noted by Hyndman and McDonnell (2009), is an
approach that results in a model of user involvement. This typically manifests
when boards have reserved places for individuals who represent a particular
cohort of members, (e.g. a certain age rage or geographic spread). While at
face value this model seems fair and appropriate for membership
organisations, elections can become popularity contests that don’t necessarily
lead to the most appropriate people joining the board and the board ending up
behaving in a parochial manner. It is required through the CRA (2018a)
Charities Governance Code that boards should establish a nominations
committee that ‘vet’ potential board members and to ensure the board has an
appropriate mix of skills, experience and representation to conduct its
business well. The democratic perspective has the benefit of the provision of
holding board members to account on a regular basis through re-election.
10
2.3.4 – Stakeholder Theory
Stakeholder theory, is criticised by (Elmagrhi, Ntim, Malagila, Fosu and Tunyi,
2018, p. 483) due to its “failure to outline how to align the often conflicting
interests of different groups of stakeholders”. (Coule, 2015, p. 78) argues that
because “stakeholders have different interests, it is therefore important that
the governing board is made up of stakeholder representatives”. This enables
engagement with stakeholders that can positively affect the growth of an
organisation through funding or service/partnership opportunities. The
challenge remains to ensure that board members act in the best interests of
the organisation as a whole rather than just representing ‘their patch’.
2.3.5 – Resource Dependency Theory
Resource dependency, according to Hyndman and McDonnell (2009), states
that a major part of the boards job is to ensure that the organisation can collect
the resources it needs to survive. This points to board members being
appointed because of the network of connections they might have, as opposed
to them having an expertise in governance matters, which could feature as a
lower priority. (Crawford, Morgan and Cordery, 2018, p. 201) note that their
studies in this area “indicate that conflicts could arise between resource
dependency from funders and staying true to the organisational social goals”.
2.3.6 – Managerial Hegemony Theory
Managerial Hegemony Theory, according to Chambers, Harvey and Mannion
(2018) suits CEOs who do not want the directors too involved in the day to day
operations of the company. The ‘power’ of a CEO comes under criticism with
this theory and it does not have an appropriate fit in non-profit governance. A
CEO that does not have authority appropriately delegated, and in turn held to
account, can lead to a board ‘coasting’ or ‘inertia’. Boards that have practiced
the operation of this type of framework have done a disservice to the
11
organisations they claim to control. The most recent example of this
framework is evident in the governance review of the FAI by Horan (2019).
2.3.7 – Theoretical Framework Conclusion
Cornforth (2005) suggests that the defined theories do not match the reality of
non-profit organisational complexity. It is further suggested that to address
that challenge, a hybrid framework model could be developed. This thinking
was agreed with by McDonnell (2016), one of the original authors of the
voluntary governance code in Ireland. The framework that was developed by
the governance code working group was the first of its kind in Ireland to try
assist non-profit organisations comply with a common standard of governance
on a voluntary basis. This has subsequently been replaced with a compulsory
code by the CRA. While the codes did not go as far as to map an ideal model
of governance, they highlighted key themes that organisations should be
compliant with.
2.4 – Common Themes
The common themes appearing within the research and evident from the
obligations noted by the CRA (2018a) are the six principles of the charities
governance code:
Transparency
Accountability
Public Benefit
Compliance
Leadership
Integrity
The researcher has assessed the academic work that has already been
conducted regarding at these topics with the intention that the findings of this
12
work will assist with the development of the research questions to be used in
this study.
2.4.1 – Transparency
Morgan-Jones and Bird (1981) and Hyndman and McDonnell (2009) agree
that poor reporting leads to a lack of transparency and further to this,
(Schnackenberg and Tomlinson, 2016, p. 1784) notes that “transparency is
often cited as essential to the trust stakeholders place in organisations”.
Cordery (2013) suggests that public interest theory points to regulation
increasing transparency through reducing information asymmetry and that
poor reporting by charities can lead to a lack of transparency. Cordery (2013)
further suggests that there is a perception that non-profits have transparency
issues’ and therefore that regulation is required to improve charities
transparency and accountability. (McDonnell, 2017, p. 02) argues “that the
continued success of the charity sector depends not only on its economic and
social activities but also on its ability to demonstrate accountability and
transparency, which in turn can protect and enhance public confidence”.
Charities that promote transparency as a way of working and ensure that
information on the operations and public benefit are readily available to their
stakeholders and funders promote a culture of trust and confidence.
(Cordery and Morgan, 2013, p. 757) states that “the impetus for regulation and
oversight of third sector organisations (TSOs) arises partly from calls for
increased accountability and transparency of the sector. One role of
regulation is to enhance the reputation of TSOs through requiring them to meet
particular standards in terms of being legally registered and report on a regular
basis.” In Ireland, charities that meet the criteria of charitable organisations
are required to register with the CRA and comply with the reporting rules.
Currently there are over 9,700 organisations on the charities register in Ireland
but there are a further 28,000 not for profit organisations (NFP) MaGuire
(2019).
13
(Dunne, 2013, p. 115), commenting on the governance and performance
reporting in Scottish charities notes how vital it is that “transparency regarding
a charity’s operations and use of resources is communicated to interested
parties” and that “it is more difficult to demonstrate transparency in the
decision-making processes of stewards within organisations that act in the
interest of the public compared to their private sector profit-oriented
counterparts.”
The CRA in its 2017 Annual Report noted that “29% of the concerns received
in 2017 related to financial control and transparency” (Charities Regulator
(Ireland), 2018, p. 21). The above commentary, complimented by the
statistical results provided by the CRA, confirms the level by which the charity
stakeholders view the importance of transparency.
Hyndman and McConville (2016) note the importance of transparency in
efficiencies and the opportunity for further research to be carried out in this
area. (Schnackenberg and Tomlinson, 2016, p. 21), discuss the link between
transparency and stakeholder theory and identify the need for “researchers to
further investigate the role of transparency as a means to manage stakeholder
relations.”
2.4.2 – Accountability
Morgan and Fletcher (2013) discuss the requirements of charity trustees to
produce a trustee annual report (TAR) as an important aspect of charity
accountability. Irish charities, and in particular, larger ones, who have been
subject to the more onerous responsibilities associated with the provisions of
the Companies Act 2014 and its previous iteration, are well used to providing
these reports and using them as a means to highlight their key achievements
and public benefit.
In an Irish context, accountability is currently primarily focused on financial
matters. The functions of the CRA under the Charites Act 2009
14
include: ensuring the accountability of charities to donors and beneficiaries of
charitable gifts, and the public (The Irish Government, 2009); and part of their
method of discharging that responsibility is by ensuring “financial
responsibilities have been assigned at management level with corresponding
accountability” (Charities Regulator (Ireland), 2018d).
It is suggested by D. McDonnell (2017) that, although traditionally
accountability was delivered through the financial statements, there are now
increasing calls for a non-financial, performance narrative. This is evidenced
by the reporting requirements of the CRA and how government-funded
charities are required to report annually on the outputs and outcomes of their
activities.
(Goodin, 2003, p. 06) alleged that “accountability is conspicuously lacking in
the Third Sector” and that this was because it was not clear to whom the
officers of the organisations were required to report and that there was an
“absence of any category of 'residual owners' akin to shareholders”. This
concern is largely addressed with the formation of the CRA.
While it is compulsory for UK charities, that are incorporated entities, with a
turnover of more than £250,000 to account using the statement of
recommended practice (SORP) to record its financial activities, it is not so in
Ireland. (The Wheel, 2018) note that “while charities SORP is not currently a
requirement outside the UK, many large Irish charities have voluntarily
adopted it in order to follow best practice in relation to accounting and reporting,
and particularly to demonstrate the highest level of transparency and
accountability for all their stakeholders”. It is noted by Benefacts (2019) that
in 2018 , 562 non-profit companies filed their financial statements using the
SORP model and that this represented an annual increase of 4%. While this
figure seems small relative to the overall number of charities in Ireland, there
is only information available from the CRO which mean only charities that are
incorporated entities are reported on. Currently there are over 4000 registered
charities that operate as unincorporated entities. It is anticipated that the CRA
will launch a mandatory financial reporting standard for Irish charities which
15
will force other charities to a uniformed method of reporting. SORP, as a
method of financial reporting, provides a detailed narrative on the performance
and outcomes of the charity giving the stakeholders an enhanced view of the
operations of the organisation.
2.4.3 – Public Benefit
(Cordery and Morgan, 2013, p. 02) note "that requiring charities to reflect and
report on how they meet the public benefit requirement was widely seen as a
positive aspect”. The CRA notes that to be classed as a charity, the
organisation must be able to demonstrate a public benefit, not just a benefit
for a single person (e.g. fundraising for medical treatment for an individual vs
a class of person). Indeed, when applying for charitable status in Ireland, an
organisation must clearly define its public benefit, this is a relatively new
requirement. In the UK, organisations are not only required to define the public
benefit but are also required to report on how they achieve this annually. In a
research paper, Morgan and Fletcher (2013) note that there was low, medium
and high concern among charities regarding the requirements of public benefit
reporting. Charities with a high level of concern understood they needed to
give more attention to these requirements, charities with medium levels of
concern, strove to enhance the reporting they had in place. Interestingly, it
was the charities with high levels of concern, that view themselves as being
borderline charities so without giving appropriate attention to this reporting
requirement, could see themselves being struck off the charities register.
Notwithstanding the fact that UK charities have had to report on their public
benefit since 2008, (Hyndman and McDonnell, 2009, p. 28) note that the
“debate as to whether a charity provides a public benefit, and what indeed a
public benefit is, has been extensive, particularly in cases where charities
charge fees that, de facto, exclude many people”. Do charities that charge a
membership fee, meet the criteria by the very fact that some may be excluded
for economic reasons?
16
The public benefit test means that organisations need to provide evidence that:
1) The beneficiaries must be appropriate to the aims;
2) The opportunity to benefit must not be unreasonably restricted;
3) People in poverty must not be excluded from the opportunity to benefit;
and
4) Any private benefits must be incidental.
Overall the literature is pointing to a general acceptance of the requirement of
public benefit reporting but it is noted by (Morgan and Fletcher, 2013, p. 812)
that “further research on accountability regarding the development of
mechanisms for communicating this public interest dimension may offer a
useful development”.
2.4.4 – Compliance
According to the CRA (2018b), at the end of 2017, there had been a reduction
by 56% from 2016 of charities in non-compliance with the Charities Act. This
is pointing to a general acceptance and willingness to be demonstrably
complaint with the regulations so that stakeholders can be reassured that
these organisations are well run and that the funds are well managed.
(Neely, 2011, p. 122) discusses the impact of being compliant from a financial
point of view and cites that the “The increase in accounting fees [for charities]
is economically significant, since most non-profits say an audit is a cost they
would rather do without, and spend that money, instead, on programs.” But
he also goes on to state that organisations that did not conduct an audit pre-
2003 and were then subject to these regulations noted a “marked
improvement of 7% in reported fundraising”. This points towards an increase
in stakeholder confidence.
In an Irish context, since charity regulation is a relatively new phenomenon,
and SORP is not yet mandatory, compliance, heretofore, has often been
17
referred to in the context of the voluntary Governance Code. (A. McDonnell,
2017b, p. 02), in his submission to the Governance Code Review noted,
“smaller entities facing an ever-increasing compliance burden” and
“mandatory rules demanding statutory compliance” that does not lead to “rear-
guard defences along with tick- box compliance and being distracted from the
forward-looking orientation on achieving strategic objectives”. He suggests
that “rules and principles don’t have to be mutually exclusive. There could be
a regulator’s mandatory code of basic rules and practices for all charities and
a complementary sector body’s guidance on enhanced principles-based
governance practices for charities over a certain size” and that “it is not
pointing towards a ‘one size fits all model”.
2.4.5 – Leadership
(Third Sector Company, 2019) states that “good leadership is rooted in the
ability to achieve growth and sustaining the engagement of people to
accomplish something extraordinary together”. When we look at leadership in
a non-profit context, the literature tends to point to boards and senior
management, what ‘tone’ is set and how the mission, aim and values are
translated into the day to day work. (Parsehyan, 2011, p. 171) offers a view
that “most organisations today prefer that their middle-ranking staff take on a
leadership role” and this is to empower them to compete with the sometimes
rapidly changing environment they find themselves in.
Some leadership theories that are particularly linked with the not for profit
sector are servant leadership and transformational leadership. (Stone,
Russell and Patterson, 2004, p. 355) refer to the transformational leader
building a commitment to the organisation and the servant leader whose
primary focus is on their followers and the have an “unconditional concern for
the well-being of those who form the entity.” These leadership styles have a
link to the governance theory and there is potential for organisations to attract
board members with these styles based on how the organisation is governed.
18
The Public Sector Commission (2017) notes the importance of the contribution
that boards make by providing strategic leadership and direction across
services. This variation in theoretical approach supports the view that
organisations are best served when board members bring different skills to the
table. (Ingley and Walt, 2001, p. 175) talk about the importance of board
members “setting the strategic course for the organisation” while also
periodically reviewing the mission, values and aim of the organisation. (Harris,
Petrovits and Yetman, 2017, p. 153) talks about the “tone at the top” and the
leaderships engagement in the charities mission. This is discussed in the
context of setting appropriate controls and accountability practices. (Stone
and Ostrower, 2007, p. 420) discuss effective CEOs as those who provide
“board-centred leadership” by providing guidance to the board in fulfilling its
governance function.
2.4.6 – Integrity
Within the charities governance code there are six principles. Each principle
has a number of core standards that all charitable organisations are expected
to comply with and there are ‘additional standards’ that only apply to more
complex organisations. The principle of behaving with integrity has no
additional standards, all organisations are expected to comply with every
aspect of the charity governance code in this respect. This alone highlights
the importance that is placed on this principle in the eyes of the CRA. Integrity,
the trait of demonstrating honesty and having strong moral principles, is clearly
an important factor in developing trust and public confidence in the
organisation. (Connolly, Hyndman and Liguori, 2019, p. 06) talk about
charities developing “intangible sources of external legitimacy such as integrity,
which, in turn, are likely to engender the trust and support, not only of
beneficiaries, but also of donors/funders”.
Stone et al. (2004) note that integrity is a common attribute between servant
and transformational leaders and Ingley and Walt (2001) list integrity as the
most important attribute of board directors.
19
Harris et al. (2017) links integrity with leadership discussing how the ‘tone at
the top’ and the implementation of a code of conduct for directors increase
workplace integrity and again, demonstrates managements engagement with
the organisations mission.
(Schnackenberg and Tomlinson, 2016, p. 1797) reinforce the link between
integrity and trust in an organisation with their view that “Stakeholder
perceptions of an organization’s information accuracy are positively related to
perceptions of the organization’s integrity” and that “Integrity perceptions
refers to the degree to which the organization enacts values that stakeholders
find acceptable, including honesty”.
2.4.7 – Common Themes Conclusion
The key themes that have been discussed have demonstrated links to each
other and to the various governance theories discussed earlier. It is clear from
the research that the importance of organisations and boards implementing
practices to ensure that their charities can report positively on these key areas,
and show demonstrable compliance with the CRA governance code, cannot
be underestimated.
2.5 – Literature Review Conclusion
Charitable entities, regardless of whether they are funded publicly through the
exchequer or privately through membership fees or fundraising events, are
quite different to private commercial entities. Their public benefit purpose,
large stakeholder base and multiple regulatory and reporting channels may
make it difficult to measure their success or impact as it is not viewed from the
‘bottom line’ of the financial statements but rather from the provision of their
service or societal impact. There can be different perspectives on this
measurement depending on if you are a funder or service user. Certainly, the
major challenge facing charitable entities at the moment is the ‘governance
20
agenda’. Benefacts (2018) notes that without the confidence of the
stakeholders that either fund charities through central government or private
fundraising, this €14 billion sector could be significantly damaged.
21
Chapter 3 – Research Question and Objectives
3.1 – Research Area
The researcher decided on the research area using a rational and creative
thought process. The techniques suggested by Saunders, Lewis and Thornhill
(2009) include using a mixture of both the rational and creative way of thinking;
Figure 1: More frequently used techniques for generating and refining research ideas (Saunders et al.,
2009, p. 25)
The researcher therefore considered his own strengths and interests,
discussions with colleagues, media scanning, exploring personal preferences
and brainstorming.
The research study was created to enable the researcher to investigate a topic
that is:
Currently on the social agenda;
Relevant to his career;
Of value to the sector within which he works at a leadership level.
This method of research choice was effective and avoided the “absolute panic
because nothing in which you are interested or which seems suitable has
come to mind (Jankowicz 2005)” that was cited by (Saunders et al., 2009, p.
25).
22
3.2 – Research Question
The primary research question and the aim of this explorative study is to
understand the challenges encountered by Irish charities with implementing
good governance standards. The theoretical frameworks outlined in the
literature review discuss a number of governance models that have been
developed and the researcher will endeavour to ascertain if a theoretical
framework can be defined that will identify the optimum governance
arrangements for charities.
To achieve the aim of the study, the researcher will address the following sub-
questions:
Q1: Examine the nature and extent of the concerns regarding regulatory
implementation in Irish charities.
Q2: Identify and discuss the factors that lead to the variation in governance
practices in Irish charities.
Q3: Examine if the introduction of charity regulation correlates with the
better delivery of organisational services.
Q4. Can a theoretical framework be defined to state what the optimum
model of governance is for charities?
3.3 – Research Objectives
It is clear from the literature review that the breath of research available on the
subject of not for profits is extensive, however there are significant gaps in the
theory regarding the implementation of formal regulation of charities. The
themes that are recurring are current and on-trend. Charities are working in
an increasingly regulated environment and enjoy a position of trust in society
23
but as can be seen from some very recent, high profile scandals reported in
the media, the trust is fragile:
“1 in 3 charities report drop in income after scandals in sector’ (RTE,
2016);
“Console scandal: Elaborate web of deceit of an 'untouchable' charity
founder” (O’Regan, 2016);
“Scouting Ireland’s €1m in State funding to be withheld” (Power, 2018).
By answering the questions that are outlined above, this research can be used
by charity organisations to determine the most appropriate model for their
governance structures. As governance and charities regulation is very much
on the societal radar at the moment, this work has the potential to contribute
positively to the ongoing changes within the sector.
3.4 – Personal Motivation
In a sector that is facing increasing regulatory obligations, those of us who
hold senior executive positions have a leadership responsibility to ensure our
organisations act in a responsible and transparent way. I have been
professionally engaged in the governance agenda for nearly ten years and
have worked through governance code audits. I would like this research to
contribute to the identification of current challenges facing organisations as
they move to comply with their new obligations and facilitate discussion on
overcoming those challenges.
24
Chapter 4 – Methodology
4.1 – Introduction
(Saunders et al., 2009, p. 05) defines research as “something that people
undertake in order to find out things in a systematic way, thereby increasing
their knowledge”. This chapter sets out the research framework, method of
data collection and the rationale for conducting the research using this
approach. This chapter will further examine the research philosophy,
approach and strategy. The conclusion of the chapter will outline the authors
consideration of ethical issues.
4.2 – Research Philosophy
Figure 2: The Research ‘Onion’ (Saunders et al., 2009)
The research philosophy adopted by the researcher “contains important
assumptions about the way in which you view the world” and these
assumptions “underpin the research strategy and methods chosen as part of
the strategy” (Saunders et al., 2009, p. 108). When examining research
philosophy, it is agreed by Johnson and Clarke (2006) and Saunders et al.
(2009) that the research strategy, methods and philosophy have a close
relationship as once the philosophy is defined, that in turn forms the strategy
25
and has a lasting impact on how the research is conducted and how the data
that has been collected is understood. The two types of research compared
by Saunders et al. (2009), one searching for facts, the other for feelings and
attitudes, will differ in strategies, methods and data selected as being useful
to the research.
Using the ‘research onion’ diagram (Figure 2), the researcher noted that the
research philosophies within the outer layer, essentially provide the foundation
on which the study is built. The researcher considered a number of
philosophies mentioned in the ‘onion’ when developing this study. In
considering a pragmatic philosophical approach, (Saunders et al., 2009, p.
110) discusses the concept of ontology and how it “raises questions of the
assumptions researchers have about the way the world operates” as
epistemological concerns relate to ‘truth’ rather than ‘how to’, the researcher
needed to acknowledge that the research question is not based on any
assumptions but is seeking knowledge regarding how Irish charities are
adopting to the implementation of formal regulation.
Positivism, similar to pragmatic thinking, proposes that there should be an
emphasis on objectivism. (Bryman, 2001, p. 12) notes the purpose of
positivism is to “generate hypotheses that can be tested and will thereby allow
explanations of laws to be assessed”. He further notes that “knowledge is
arrived at through the gathering of facts” and that “science must be conducted
in a way that is value free (objective)”. This research will present some
answers from participants that will be quite subjective. This is to enable the
researcher gather expert opinion on challenges from within the third sector on
the implementation of formal regulation.
26
4.3 – Research Approach
The next layer of the ‘research onion’ considers research approaches. The
theory required for use in research is classed in two distinctive approaches,
deductive and inductive.
Deduction (testing theory) is considered in the context of scientific research
and comprises the development of a theory that is exposed to thorough testing.
(Saunders et al., 2009, p. 124), citing Robson (2002) notes that deduction is
developed through five stages:
1) “Deducing a hypothesis
2) Expressing the hypothesis in operational terms, which propose a
relationship between two specific concepts or variables
3) Testing this operational hypothesis
4) Examining the specific outcome of the inquiry
5) If necessary, modifying the theory in the light of the findings”
The use of a deductive approach requires the researcher to base their results
on logic. The ability to base findings on experience or observation does not fit
within this theory. With the constraints of only limited literature being available
regarding the subject matter and the aim of gathering data based on individual
experiences and views, the researcher believes that a deductive approach
would not be appropriate for this study.
27
Figure 3: Major differences between deductive and inductive approached to research. (Saunders et al.,
2009, p. 127)
The induction (building theory) approach understands that the researcher has
developed some assumptions or the shell of a theory from conducting the
literature review. (Saunders et al., 2009, p. 126) comments that “you may end
up with the same theory, but you would have gone about the production of that
theory using an inductive approach: theory would follow data rather than vice
versa as with deduction”.
The researcher, assessing both theories, has selected an inductive approach
and will develop a series of research questions to elicit answers from the study
participants. A further valid consideration is that a deductive approach would
require the researcher to hold an expert knowledge in the field of study
gleaned from the literature review. The limitations of the availability of
literature in this area have been previously mentioned, so building this ‘expert
knowledge’ was not possible.
The research purpose is a further consideration when making decisions
regarding approach. There are three methods of research used to classify the
purpose of the research; exploratory, descriptive and explanatory.
28
Exploratory – what is happening, gain new insights and ask questions
to assess in a new light;
Descriptive – research used to describe a situation, subject or
behaviour;
Explanatory - attempt to connect different ideas and to understand the
different reasons, causes, and their effects.
(Saunders et al., 2009, p. 140) notes "three principal ways of conducting
exploratory research:
1. a search of the literature;
2. interviewing ‘experts’ in the subject;
3. conducting focus group interviews.”
Based on this description, an exploratory study was deemed the most
appropriate mechanism by the researcher, however there will be some small
level of cross over with descriptive and explanatory to allow for behaviours to
be described and for ideas to be connected to the impact of formal regulation
of charities.
4.4 – Research Strategies
The research onion by Saunders et al. (2009) notes seven research strategies
that can be surmised as follows:
Strategy Description
Experiment
The purpose of experiment research is to study
causal links and whether a change in one
independent variable produces a change in another
dependent variable. Experiments tend to be used in
exploratory and explanatory research to answer
‘how’ and ‘why’ questions.
29
Survey
The survey strategy is usually associated with the
deductive approach. It is most frequently used to
answer who, what, where, how much and how many
questions. It therefore tends to be used for
exploratory and descriptive research.
Case Study
The case study is a strategy for doing research
which involves an empirical investigation of a
particular issue within its real-life context.
Action Research
Action research refers to a wide variety of
evaluative, investigative, and analytical research
methods designed to diagnose problems or
weaknesses and help develop practical solutions to
address them quickly and efficiently.
Grounded Theory
Grounded theory is particularly helpful for research
to predict and explain behaviour. The emphasis on
this is upon developing and building theory.
Grounded theory involves the collection and
analysis of data. The theory is ‘grounded’ in actual
data, which means the analysis and development of
theories happens after you have collected the data
Ethnography
The purpose of ethnography is to describe and
explain the social world the research participants
inhabit in the way in which they would describe and
explain it. This research strategy is very time
consuming and takes place over an extended time
period as the researcher needs to immerse
themselves in the social world being researched as
completely as possible.
Archival
Archival research makes use of administrative
records and documents as the principal source of
data.
Table 2: Research strategies description
30
Having given consideration to the above descriptions and the previously made
decision that an exploratory study was the most appropriate mechanism for
constructing this research, the researcher deemed that grounded theory was
the most appropriate strategy to deploy for this study.
In the context of this research, the researcher conducted a literature review
ahead of data collection and that was used as the means to develop theory in
the data collection and review stages. The implications as noted by Saunders
et al. (2009), in terms of this process being time consuming were considered
by the researcher however given the nature of the topic of study, the
researcher understood and was content to commit to such a process.
4.5 – Research Choices
While it would be easy, after selecting the topic, to jump straight to gathering
data by using questionnaires or interviews, it is essential however, that before
commencing the project, that the researcher gains an understanding and
provides an explanation why the selected method of data collection was
chosen.
The two terms that are most common with research projects are qualitative
and quantitative data:
Quantitative data is typically generated from large numbers of surveys
and generated numerical data that can be analysed scientifically.
Qualitative data provides a more detailed response from much fewer
participants.
This research was conducted using a qualitative methodology as the research
attempted to extract detailed and meaningful responses from the participants.
31
(Bryman, 2001, p. 264) notes qualitative research as a “strategy that usually
emphasises words rather than quantification in the collection of analysis and
data” and emphasises “seeing through the eyes of the research participants”.
The steps to qualitative research are outlined as follows:
Figure 4: An outline of the main steps of qualitative research. (Bryman, 2001, p. 267)
The researcher gave significant consideration to the concept of “seeing
through the eyes of the research participants”, when framing the actual
questions so as to ensure a detailed response could be given and followed up
on as required.
Although some qualitative data will be presented within the research (number
of register charities, compliance figures, adoption of SORP), this is not enough
data to contribute to answering research questions to achieve the objective of
the study.
32
The researcher has engaged a ‘multiple method’ approach to gather data.
This was realised by:
1) Conducting semi-structured interviews with the participants to allow for
discussion to develop should a particular topic of interest arise.
2) The interviews were followed by a focus group that enabled the themes
that had manifested to be discussed further in a facilitated session to
clarify and challenge the data that had been collected through the
individual interviews.
4.6 – Time Horizons
Saunders et al. (2009) notes the importance of deciding if the research will be
a snapshot of a certain point in time or a representation of events over a period
of time. In this instance, the researcher has opted for a ‘snapshot’ using a
‘cross sectional’ time horizon. This approach, according to (Saunders et al.,
2009, p. 155), will enable the researcher to “describe the incidence of a
phenomenon or to explain how factors are related”, whereas the longitudinal
approach would be appropriate to identify changes or developments within the
field of study. Considering the time constraints of the research, a longitudinal
research study was not a feasible option.
4.7 – Sample
(Robinson, 2014, p. 26) outlines a four-point approach to qualitative sampling
as follows:
1) Define the sample;
2) Decide on sample size;
3) Devise a sample strategy;
4) Source the sample.
33
Figure 5: Robinsons four-point approach to qualitative sampling. (Robinson, 2014, p. 26)
4.7.1 – Define the Sample
The researcher established the criteria for the participants of the study as
being individuals who are in, or have been in, a senior management
(professional or volunteer) role, consultant role or advocate/regulatory role in
the in Irish charity sector in the past five years and have experience in
implementing a governance framework. While a specific educational
qualification was not part of the criteria of the sample, all participants were at
least educated to degree level. The selection of the five-year criteria was to
ensure perspectives were garnered from people who have significant
experience in the sector with:
a) Voluntary participation of the Governance Code;
b) The implementation of the main provisions of the Charities Act 2009
(brought into effect on 16th October 2014); and
c) The implementation of a compulsory governance code (November
2018)
34
4.7.2 – Justification of Sample
There are multiple views in terms of what the sample size for a qualitative
research project should be. The researcher selected a sample size of:
Twelve (12) interview participants; and
A focus group of seven (7)
The researcher had initially anticipated conducting twelve interviews spread
evenly between senior managers, consultants, and advocates/regulators with
the aim of achieving a wide enough spread of perspectives to develop themes
and points of discussion that could be linked to the literature.
The following table is what interviews were anticipated to happen versus what
actually took place.
Professional Role No. of Interviews
Anticipated Actual
Senior Manager 4 4
Consultant 4 2
Regulator/Advocate 4 3
Total 12 9
Table 3: Research Interview Schedule
The researcher took the view that this was a significant enough sample to
uncover a range of opinions without saturating the findings.
The focus group number was derived from the number of people holding the
position of Regional Manager (CEO equivalent) in a national charity network
of seven individual incorporated charities operating with the same objects and
resources.
35
4.7.3 – Selection of Sampling Strategy
The researcher selected a convenience sampling strategy essentially due to
the time constraints and the defined criteria. The participants of the study were
invited to participate as they were conveniently available to researcher. There
was a total of twelve individuals invited to participate in the study (nine agreed,
the researcher was not able to agree a mutually suitable time for two, and one
declined).
4.7.4 – Source the Sample
All participants willingly took place in the study without any undue influence.
No research participant was a relative of the researcher or an employee of the
researcher’s organisation. Convenience sampling was used to source all
participants and as appropriate levels of participation was reached using this
process, no further sampling techniques were required.
4.8 – Pilot Testing
The researcher conducted a pilot interview with a colleague who matched the
eligibility criteria. The pilot interview provided a guideline of the duration of the
interview and an opportunity to gain a perspective on whether the proposed
questions would provide the appropriate data to enable the author to answer
the research question.
4.8.1 – Results from Pilot Testing
The questions that were asked as part of the pilot interview did not encourage
the depth of response that the researcher was looking to develop.
Following the pilot, the researcher added two questions and reframed five.
The questions were reordered to map them specifically to the research
objectives which facilitated:
36
1) A better flowing interview in terms of the moving between objectives;
2) A more detailed response from the participants;
3) Follow up questions being asked by the researcher leading to a more
conversational style of interview;
4) The gathering of more detailed data that proved invaluable when
creating the focus group discussion topics.
4.9 – Interview Structure & Procedure
The researcher conducted the individual interviews using the questions noted
in ‘Appendix 4’ over a two-week period in July with the focus group scheduled
to take place on the third week to give time for the common themes to be
extrapolated and questions (Appendix 5) to be formed. Two of the nine
interviews were conducted by telephone with the remaining seven happening
face to face (five in the participants workplaces, two in quiet coffee shops).
The interviews were semi-structured, and the researcher used open ended
questions which allowed for follow ups to be asked and a more conversational
style to develop. Following each interview, the recordings were transferred to
a secure file storage location and deleted from the mobile recording device.
The storage of audio files facilitated the transcribing and data collection
process.
4.10 – Focus Group
(Collins and Hussey, 2014, p. 142) note that focus groups can be useful by
‘generating propositions from the issues that emerge”. A focus group with a
management team of a large national charity network was engaged “in order
to deepen the understanding of the already collected data” and “give insights
into the reasons for particular opinions and views” (Kellmereit, 2015, p. 44). In
this instance the group was ‘pre-existing’ and the researcher expected the
“social group to bring to the interaction comments about shared experiences
37
or events” and “generally promote discussion and debate” (Bloor, Frankland,
Thomas and Robson, 2001, p. 22). This particular group of managers had
recently been through the process of a major organisational restructure with
the key focus on governance and a suite of new legislative requirements that
they had not had to consider until recently. This focus group assisted the
researcher with putting the views of the individual participants regarding
regulatory implementation into perspective.
4.11 – Data Analysis
In qualitative data, the researcher is analysing words and not statistics. Words
can be interpreted in different ways and so the researcher conducted a
process of ‘thematic coding’ to facilitate searching the data for themes and
establishing an analytical matrix. The researcher reduced the data by
surmising the results and displayed the data on an Excel sheet to form the
matrix to show the relationship between the identified themes.
The final stage of the data analysis drew conclusions from the research which
led to the development of findings for discussion, a hybrid theoretical
framework and recommendations.
The note taking process during interview stages proved effective in terms of
preparing the researcher for the data analysis task as significant work had to
be undertaken with transcribing notes and interviews leading to a familiarity
with the material. This supported the researcher with identifying the key
themes and relating them to the existing literature with relative ease.
38
4.12 – Ethical Considerations
(Saunders et al., 2009, p. 183) notes that “in the context of research, ethics
refers to the appropriateness of your behaviour in relation to the rights of those
who become the subject of your work, or are affected by it”. The researcher
has identified consent and anonymity as the two most significant ethical
considerations of this study.
4.12.1 – Consent
In advance of participating in the research project, each participant was
provided with the participant information sheet (Appendix 6). This provided
each participant with full details of the purpose of the study and how the data
collected would be treated. Consent was addressed explicitly at the beginning
of each interview and all participants signed the consent form (Appendix 7).
All participants were informed that consent could be withdrawn at any time and
that they could refuse to answer any question that was presented. Each
participant had a right to request a transcript of their interview. No participant
exercised this right.
4.12.2 – Anonymity
Each participant of the study has been anonymised and has had any
identifying statements or positions within organisations removed. This
enabled the participants to speak more freely and give more detailed
responses to some topics that could be considered commercially sensitive and
protect the integrity of any organisations or boards that may have been
discussed.
39
Chapter 5 – Analysis and Findings
5.1 – Introduction
This section will analyse the key findings and themes that arose during the
research study. The participants, while having different educational
qualifications (Appendix 2) were all qualified to primary degree level or higher.
All participants had current roles within the Irish charity sector but there was a
variation of perspective in terms of these roles. The participants of the focus
groups were all Regional Managers (CEO equivalent) of seven independent,
incorporated, regional charities all of whom have the same charitable objects,
level of resources and service level agreement with their funder. To assist the
reader and in order to present the findings in a manner that is cohesive, this
section will maintain the structure of the interview questionnaires and, for the
purposes of accuracy, contain some direct quotations from the participants.
5.2 – Sub Question 1
Examine the nature and extent of the concerns of regulatory
implementation in the Irish charity sector.
5.2.1 – Sub Question 1A
Since the concept of the regulation of Charites was introduced, what have
been the concerns raised by organisations from within the sector?
The common issues that were raised by the individual participants of the study
were:
Ability of smaller organisations to comply with standards.
Confusion & fear and of what is actually required of them.
Level of experience at board level.
40
Fear of change to a way of working that may have been ongoing with
no issues for some time or ever.
Financial impact of increased levels of audits.
Lack of qualified staff to carry out the new functions.
Implementing a change process for the new ways of working.
Board moving to oversight rather than operational.
Increased level of reporting required.
Ability to recruit trustees/board members.
Taking resources from day to day work.
Participant ‘B’ specifically noted how “Volunteers give generously and the
political system within organisations gives order to the organisation and
there is a fear that this could change that”.
Participant ‘H’ noted the “concern from people about the legalities about
being a trustee when they joined ‘just to help out’".
Participant ‘J’ made specific reference to the concerns that charities have
regarding this ‘regulatory burden’ taking resources from day to day
services in that “the focus of charities is solving societal problems,
governance can be seen as an added challenge” and that there was a real
concern over “tick-box regulation”.
The focus group agreed with the general themes and noted that their boards
are cautious about doing the wrong thing and how a negative public report
could affect their personal or professional reputations. It was agreed that in
principle boards/trustees need to lead the governance agenda but in reality,
the skills around board tables do not enable this to happen and boards get
over reliant on the executive management to design and implement processes
and procedures to ensure compliance.
41
5.2.2 – Sub Question 1B
How widely do you think these concerns, or others, shared across the sector?
There was a clear majority of interviewees agreeing that regulation was sought
and welcomed by the sector as a way to create confidence and trust with the
public but that the concerns, in particular around the burden of regulation were
real and shared widely. Concerns relating to recruiting suitably qualified and
independent trustees are shared and the level of reporting to CRO, CRA,
Revenue and funders was a universally shared concern with a suggestion of
a ‘Charity Passport’ (one report for all) suggested by three participants.
The focus group could agree that their biggest concern is the ability to recruit
board members with the appropriate level of expertise and independence.
This was further qualified by highlighting the challenge of diversity and that the
companies are finding it difficult to ensure diverse membership and in
particular, younger board members. These companies have a current added
challenge of moving from a locally based to a regionally based organisation
and all members of the focus group agreed that individuals were more likely
to volunteer as board members for an organisation that directly impacts their
communities rather than a bigger ‘more detached’ organisation.
5.2.3 – Sub Question 1C
Do the themes of the concerns vary based on the size of the organisation? (for
example, do the concerns of an organisation with a large turnover, staff team
differ from an organisation that is solely voluntary led and managed)
There was a general agreement from the participants that the concerns vary
and can be grouped based on the scale of the operations. It was suggested
that the larger organisations, whom employ a CEO (or equivalent) should find
the process of regulation easier as these organisations would typically be
incorporated entities and so would have already experience and processes in
42
place to report annually to the CRO. The challenges for these organisations
are how their local branches are viewed. Are they part of the national charity
or are they individual local charities? The organisations suggest that the latter
would have significant impact on how reporting needs to be carried out and
that this has the potential to add a significant financial burden.
Participant ‘A’ noted that there are further concerns within larger
organisations that “there is a danger of staff becoming the experts
rather than the boards, and that the boards have serious responsibilities
in this area that cannot be delegated”.
The focus group confirmed that from their experience of working with other
local charities in their respective areas, the concerns are shared regardless of
the size of the organisation. It was noted that organisations that are fully
publicly funded rather than relying on membership fees or fundraising, may
have higher levels of accountability imposed on them by their funders and in
the case of the organisations that the focus group represents, their structures
are tightly controlled by their funders giving them less room to manoeuvre or
deviate from what would be classed a good approach to governance.
5.2.4 – Sub Question 1D
Have the concerns raised been addressed in recent years or are organisations
of the view that there are barriers to compliance that they find difficult to
overcome?
It was noted that the CRA had engaged with a consultative process ahead of
releasing the new compulsory governance code and the new code has
changed the requirements that were in place in the old voluntary code.
Participant ‘B’ stated that the new code is a “diluted” code and was
moving towards the “lowest common denominator” when other non-
43
profit organisations, who are not technically charities are starting to
comply with higher standards.
All participants mentioned the handbooks that are available from the CRA to
support trustees and there was significant agreement that the CRA is not likely
to take a heavy handed approach to enforcement of the code and will be more
likely to enter into further consultation in 2020 as to how support can be
provided to organisations to assist with compliance.
It was noted by Participant ‘J’ that the DCYA was commencing the
provision of a ‘shared service’ for 10 of the smallest youth work charities
to assist with their compliance burden and it was suggested that this
model of support demonstrated a very pro-active approach on the part
of the funder.
The focus group confirmed that none of them had made any submissions to
the CRA or other representative organisation during the consultation process
and were dealing with regulatory issues as they arose.
5.3 – Sub Question 2
Identify and discuss the factors that lead to the variation in governance
practices in charities.
5.3.1 – Sub Question 2A
What in your view are the factors that have led or can lead to governance
failures within charity organisations?
While there were differing views in terms of the specifics of what causes
governance failures, there was general agreement in terms of the themes of
44
understanding, board competence, group think and tick-box governance. The
lead issues as noted were from:
Participant ‘A’ as a “lack of awareness of the totality of their
responsibilities as trustees”;
Participant ‘B’ noted that “internal politics can lead to conflicting views
of the charities mission”;
Participant ‘C’ noted that “the emotional attachment of trustees can lead
to skewed decision making” and that “policies are being put in place but
not implemented, leading to tick-box compliance”;
Participant ‘F, H & G’ noted that the challenge of ‘group think’ can
develop when there is a dominant individual around the board table and
this is typically the CEO or Chairperson. Group think develops from
boards and trustees not sufficiently questioning the management or
having an appropriate oversight system in place;
Participant ‘G’ noted “mismatch of board skills compared to what is
actually required by the organisation at a place in time”.
Three out of the seven focus group members confirmed that they had
experienced governance failures in the last fifteen months and cited the
following reasons:
Lack of board members;
Issues inherited from old companies from before their new companies
were formed in 2018 (boards claimed not to have enough information
for decision making);
Gaps in appropriate data management (ICT) systems;
Ad-hoc arrangements for volunteering (no clearly defined volunteering
policy).
Each of these companies is going through a change management process
with significant organisational restructuring and the participants of the focus
45
group were confident that each of the issues are being addressed within their
new governance structures.
Once participant of the focus group is experiencing significant difficulty with
recruiting board members and as such is finding it difficult to call meetings that
are quorate.
5.3.2 – Sub Question 2B
Given the reporting requirements that are now in place, why do you think we
still hear stories about governance failures within charities?
It was universally agreed that charities are typically governed by good people
who want to do the right thing, a lack of resources results in organisations
operating above capacity.
Participant ‘A’ noted that, “charities that will do anything it takes to
deliver its service” and “organisations taking unnecessary risks to
remain active”.
Participant ‘E’ suggested that a high-profile case, demonstrating what
the consequences are for non-compliance with regulations, would
assist with sending a message to the sector.
Participant ‘F’ notes that ‘governance is down to people and that an
unimplemented code will not provide for appropriate behaviours and
that board term limits need to be in place”.
Participant ‘G’ noted the following matrix:
Badly Intentioned Badly Informed
Well Intentioned Well Informed
46
He suggested that most failures occur with well-intentioned but badly
informed trustees.
Participant ‘G’ noted the importance of ‘board reviews’ and that self and
external assessments need to be scheduled to measure the
effectiveness of the board.
The focus group noted that the lack of resources available to ‘stay on top of
the work’ is challenging and that a lack of understanding of board members of
the significance of their governance responsibilities can result in them focusing
too much time on operational or service delivery matters rather than taking the
‘higher level view’. Four out of the seven focus group members noted that
they need to prompt their Chairperson to ensure adequate time is allocated on
board agenda for governance and compliance matters.
5.4 – Sub Question 3
Examine if the introduction of charity regulation correlates with the
better delivery of organisational services.
5.4.1 – Sub Question 3A
Has the implementation of charities regulation impacted on the delivery of
services? Positively or negatively?
All participants agreed that there is no evidence to suggest that the
implementation of charities regulation has significantly impacted on the
delivery of services but that it has the potential to do so.
Participant ‘A’ suggests that “organisations still seem to be providing
the services they are set up to do and see the governance as an add
47
on requirement and it’s not clear how many are taking the governance
requirements seriously”.
Participant ‘E’ stated that he believed “there is very little research
worldwide that links good governance to better organisational
performance within charities”.
There was a shared view that, while during the initial implementation phase,
the governance agenda has the potential to refocus resources within
organisations, the long-term benefits should be seen in terms of having better
managed, leaner organisations.
Participant ‘H’ stated that “well run organisations will shine as their level
of activities will be high and that organisations need to have
governance processes to suit themselves and do not have to do
anything that is overly complicated compared to the scale of the
operation they are running”.
The focus group agreed that there was no substantial impact on their services
but that a failure has the potential to cause significant damage as the entire
brand depends on public confidence. All members of the focus group agreed
that the current governance agenda is taking up to 80% of their time but this
is because they all find themselves in an organisational change process and
they maintain that this level of time will reduce significantly over the next twelve
to eighteen months and that overall will result in the organisation being able to
direct more resources to front line services.
5.4.2 – Sub Question 3B
How can charities create a balance with ensuring their regulatory
responsibilities are met but that a compliance agenda does not take away from
front line services?
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The cost of compliance with the various regulatory obligations and the
acceptance that this needs to be understood as a permanent business cost
was a common discussion.
Participant ‘C’ noted that the “governance obligations should be seen
as an enabler and having appropriate policies and procedures in place
lays the foundations for quality service”.
Participant ‘E’ suggests that “all funding applications or project
proposals should have a section to outline the ‘overhead’ or
‘governance’ cost and this should be considered the when granting
funding for a project”.
Outside of the cost implications, participants ‘F & J’ mentioned that
board agendas need to be constructed in a way that facilitates a
balance of time for compliance and mission discussion. Both note how
easy is it for either side of the business to take over from the other and
that the Chairperson needs to be strict in not allowing that to happen.
Participant ‘J’ further suggests the creation of a “traffic light compliance
calendar” so board members can have an understanding of when
specific reports and reviews (of policies) need to be happen, and
question if they don’t.
The focus group noted that one of the seven participants has a compliance
calendar. While this was considered to be “very organised” it was noted this
particular company is heavily dependent on the manager to coordinate this
calendar. Two of the seven participants use their annual work plan as a hybrid
compliance calendar and four of seven participants deal with issues as the
arise but do intend, as the change management programme moves on, to
develop a more formal reporting calendar. All of the organisations from the
focus group have reporting deadlines given by the funder that need to be
strictly adhered to for funding reasons.
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5.5 – Sub Question 4
Can a theoretical framework be defined to state what the optimum model
of governance is for charities?
5.5.1 – Sub Question 4A
Is it important that organisations strike a balance of independence, expertise
and connections to the mission of the charity with the board members? And
if so, how difficult is it to achieve this balance?
There was unanimous agreement that board members need to have a mission
connection to the charity and that board members should not consider
volunteering if they do not have a belief in the values, mission or aim of the
charity. All participants also agreed that having independent expertise on the
board was important.
Participant ‘A’ noted that “trustees, who are internal to the charity, can
feel nervous about lots of 'outsiders' coming in to run the charity”.
Participant ‘B’ highlighted the importance of operating a ‘nominations
committee’ and that their role should be about ensuring diversity on
board and that “a range of people with various competencies are
recruited”.
Participant ‘F’ noted the “importance of understanding that charities are
based on groups of people with common beliefs coming together to
solve problems, so it was extremely important that when recruiting
externals that they have a link to the mission and values”.
The focus group discussed the reality of the challenges around board balance
and it was found that:
50
Six of seven participants state they have an appropriate balance of
independence, expertise and mission connection.
Three of seven participants have a succession plan.
Four of seven participants have a skills matrix for identifying gaps on
their boards.
Two find it easy to recruit board members, two find it challenging and
three find it difficult.
5.5.2 – Sub Question 4B
What do you think the level of independence of boards should be from the
operations of the organisation?
Overall there was an agreement with the principle that boards needs to act in
an oversight capacity and not interfere with the day to day operations of the
company, but some participants of the study were more animated about this
than others. This stemmed from experiences that they had gone through
where boards were acting in an executive manner and the lines between what
was oversight and what was executive were blurred leading to very serious
conflict. Five of the nine individual study participants used the phrase “boards
should be noses in, fingers out”, meaning that they should know and
understand what is being done in their names but that that day to day
responsibility is delegated to the manager.
Participant ‘G’ noted that smaller organisations can face challenges in
this way as they may not have a staff or it’s a small committee doing
the work but that this can be counteracted by having a segregation of
duties e.g. the person writing cheques, is not the person checking the
accounts, and this can provide appropriate oversight at that level.
The focus group participants noted that six out of seven of their boards could
be classed as fully oversight and have established board committees to work
with the management on the various areas of the business. One of the boards
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is more operational, particularly around financial matters, and this is leading to
micro management and trust issues with lack of adequate oversight, and
blurred boundaries between the oversight and executive.
5.5.3 – Sub Question 4C
What is the one single thing a board can resolve to do, to ensure it is promoting
the highest governance standards for the organisation?
Participant Suggestion from Individual Participants
A Resolve to adopt the CRA code and put in place procedures
for ensuring full compliance.
B
Behave properly. If there are poor governance standards
within the board, it is impossible to expect good behaviour
within the organisation. A good governance system is about
structures, processes, policies and the behaviour of
individuals.
C Be compliant with the governance code.
D Communicate openly with all. Tell as much as possible.
E Ensure it has the appropriate culture, ethics and values.
F
Implement a board evaluation process. Need to ensure a
culture of openness and communications so boards can
discuss what they are doing well and what can be improved.
G Charities should not wait to be asked questions, they should
provide all the information that the public is interested it in.
H Understand their governing document. Know the rules and
stick to them.
J
Ensure that the board composition is good. The right people
with a skill mix to develop a culture of openness and
transparency.
Table 4: Suggested board actions to promote good governance.
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The participants of the focus group stated that all their boards had resolved to
be compliant with the voluntary (now compulsory) charity governance code
but the reality is some boards are struggling to comply with basic levels of
governance.
One of the seven participants claimed promoting highest standards.
Six of the seven participants claimed compliance with basic standards.
One board is struggling to be quorate at meetings.
5.5.4 – Sub Question 4D
What are the top four traits that the public expects charities to demonstrate?
The traits that were suggested by individual participants of the study are:
Rank Trait
1 Transparency
2 Accountability
3 Avoidance of mission drift (do what the organisation claims to do)
4 Financial Probity
5 Openness
6 Integrity
7 Efficiency
8 Honesty
9 Trust Table 5: Publicly expected traits for board (ranked by importance).
The traits agreed by the focus group, in no particular order of importance, were:
Transparent - Publishing annual report & Accounts.
Probity - Demonstrably doing the right thing.
Accountable - to its funders (the state).
Openness - with its communication with stakeholders, reports, signage,
complaints policies, accessibility, answering questions before they are
asked.
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The discussion regarding these behaviours led to a common theme of
regulation providing the public with confidence to trust the sector.
Participant ‘G’ noted that “Trust is a quality that is present or not.
People don't half trust organisations. Trust is earned by being open,
not hiding something, not having a hidden agenda and answering
questions before they are asked. Even the term ‘charity trustee’ is all
about trust”.
5.6 – Summary of Findings
Overall the research is showing a willingness and acceptance of a new
regulatory environment that charities are operating in. There is no indication
that organisations do not want to comply or operate to the highest governance
standards but there are clearly challenges facing the sector in this regard.
Organisations facing challenges need to be resourced and supported to work
through them so the sector can ensure it has the trust of the public.
It was noted during the interviews the Irish Government makes a €4.5 million
investment in the CRA on an annual basis to carry out its work but there has
been not corollary investment in the organisations within the sector to assist
with compliance with the new obligations. Work has had to be undertaken
from existing resources.
There was a general agreement that well-run organisations will be healthier
entities leading to better services for the end user. The individuals that took
part in the interview and focus group demonstrated a clear connection to their
own organisational work and the concept of well-run charities providing
services within their communities.
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Chapter 6 – Discussion
6.1 – Introduction
This study has provided data from senior practitioners within the Irish charity
sector that raise concerns and challenges with the implementation of charity
regulation. In this section the researcher will re-contextualise the results of
the research and consider it against the information contained in the literature
review. The data gathered has identified the discussion topics of regulatory
implementation, variations in governance practice, organisational
performance and theoretical framework.
6.2 – Regulatory Implementation
The findings from the research indicated that there is a broad welcome and
acceptance of the need for the regulation of charities to be implemented to
encourage public confidence within the sector. It was further noted through
the individual interviews that the sector sought the implementation of
regulation for this reason. The fact that the CRA (2018b) has noted that, at
the end of 2017, there had been a reduction by 56% from 2016 of charities in
non-compliance with the Charities Act, supports this assertion. The findings
indicate that the practical challenges facing organisations centre around the
regulatory burden, financial and administrative. This view supports (Neely,
2011, p. 122) “The increase in accounting fees [for charities] is economically
significant” and that most charities would rather direct their resources to front
line services, “a cost they would rather do without, and spend that money,
instead, on programmes”.
While financial and resource challenges are very practical, and what can be
delivered as a service is largely dependent on the ‘bottom line’, the behavioural
challenges faced by organisations as they move to new governance models
are just as important and can often take considerable time to implement. The
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researcher has identified challenges at board/trustee level that pose a serious
challenge to the implementation of good governance practices. None of the
challenges point to an unwillingness to comply with the requirements of
regulation but more to the ability of the individuals or the organisation to recruit
suitable trustees.
The fear of change or moving from an operational role to one of oversight has
been raised as an issue. Organisations that work with boards or trustees that
get too involved in the day to day matters of the business risk blurring the lines
of who is responsible for what. Further to this, it can lead to conflict with the
executive and a breakdown of trust. The role of boards in setting the strategic
direction of the organisation and holding the management to account for the
delivery of the objectives was a clear challenge that had been identified and it
was agreed that organisations need to step towards this model of governance.
This finding compliments (Ingley and Walt, 2001, p. 175) suggestion of the
importance of board members “setting the strategic course for the organisation”
while also “periodically reviewing the mission, values and aim of the
organisation”. Harris et al. (2017) while discussing the ‘tone at the top’ make
specific reference to boards setting appropriate controls and accountability
practices.
The reporting concerns raised through the process of data collection were in
the context of the amount of similar reports that need to be provided to multiple
agencies and the administrative burden that this puts on the organisations. A.
McDonnell (2017b) had noted the concerns that an ever-increasing
‘compliance burden’, that was viewed as ‘tick- box compliance’ would distract
from the forward-looking orientation on achieving strategic objectives. The
concept of a ‘charity passport’ was raised during the interviews and the sense
of value regarding a single point of reporting, to reduce the administrative
overhead, was evident. In particular, charities are noting identical filing
required with CRO/CRA/RBO and are developing a view that this should be
done through a single portal, once.
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6.3 – Variations in Governance Practice
The variations in governance practice identified by the researcher during the
study pointed more to behaviours rather than systemic practices. The
behaviours stem from the leadership of the organisation and the ‘tone’ that is
set by them. Third Sector Company (2019) describes how good leadership
can achieve growth and sustain the engagement of people to accomplish
something extraordinary together. Internal politics was a common challenge
leading to variations in governance practice where conflicting views of the
organisations mission or conflicting personal agendas of trustees can lead to
poor decision making. This is evident on boards that are made up of
representatives of specific parts of organisations. This can enable board
members to act in a parochial way and does not necessarily encourage boards
to act jointly in the organisations interest or with collegial responsibility.
The researcher identified serious concerns regarding ‘group think’. This
phenomenon occurs when a dominant individual, typically the CEO or
Chairperson, becomes the controlling voice of the organisation and the board
culture does not encourage or facilitate an appropriate level of questioning or
oversight. Consideration needs to be given regarding the risks of operating a
stewardship theory model of governance as described by Coule (2015).
Boards need to ensure that the partnership that is created between the
executive and the oversight does not lead to over familiarity, complacency, or
reduce board churn (needs to be term limits) and that the agreed skills matrix
is implemented to ensure the most suitable board members are recruited.
There is general agreement that a standard model of financial reporting is
required within the sector. All members of the focus group had implemented
SORP within their organisations and were of the view that it provided an
excellent approach to transparency and accountability by enabling them to
provide a detailed narrative regarding the operations of their organisations and
in particular how their financial affairs are accounted for. While all of the focus
group have implemented SORP in their organisations, only 562 incorporated
charities elect to implement it.
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There was universal agreement that the level of awareness of the obligations
of charity trustees needs to raise and that they need to understand the totality
of their obligations. There was a shared view that lots of people become
involved with charities because they have a congruency with the mission and
aims and they just want to help out. There was a view that the representative
organisations and CRA need to do more in the area of awareness and training
to support organisations with the governance agenda.
6.4 – Organisational Performance
The formal regulation of charities in Ireland is a relatively recent phenomenon,
CRA registration commenced in 2016, and before that the only governance
codes in operation were voluntary (since 2012). There is no evidence to point
to enhanced delivery of services through better organisational performance
because of the implementation of this formal charity regulation. The
researcher noted a shared view from the participants of the study that better
governance practices within organisations will lead to leaner organisations
who are better able to direct their resources to front line services. The issue
of the lack of ICT systems was raised during the study and it was agreed that
these (ICT) tools need to be integrated into the day to day business of the
sector to support the work. This contention is supported by (Duffy, 2018, p.
11) who states that “technology is not just a business enabler anymore, but at
heart of organisational capacity and capability”.
The concept of charities reporting on their work and in particular their impact
is becoming more widely accepted and this, according to the research data, is
leading to a more ‘business like’ approach being required. Funders ,
government and private, are requiring charities to clearly demonstrate the
public benefit they are providing and how they are ensuring value for money.
The performance reporting is linked with the transparency theme as noted by
Dunne (2013) who commented on the importance of transparency with charity
operations. A. McDonnell (2017a) further notes the “increasing calls for a non-
58
financial, performance narrative”. The focus group highlighted the use of
annual action plans for demonstrating to funders how charitable activities are
planned and actioned throughout a reporting cycle and how the key
performance indicators will highlight the achievements of the organisation
within a specific time period.
It is noted in the stewardship model of governance that the role of the board is
to improve performance by adding value to the top of the organisation with
decision making and working in partnership with the management. There was
agreement that this concept was important, and that a board should have
appropriately qualified people within its membership that can contribute at this
level. It was also agreed that this concept was not about ‘getting rid’ of people
who would have volunteered heretofore as these are important contributors in
terms of aim, mission and values of the organisation.
6.5 – Theoretical Framework
Cornforth (2005) writing about the changing context of governance suggested
that a hybrid model of governance for charities may need to be developed
given their organisational complexity. The complexities that they face in terms
of:
Multiple funders – Public funding (state) and private (donors).
Voluntary Boards/Trustees – Oversight/operational, appropriate skills,
mission link.
Limited resources – Financial & Human.
Teams – Professional & volunteer working together (how to deliver &
manage quality).
State service – lots of charities work to compliment or fill the gaps of
state services.
Regulation – by multiple entities (CRO, CRA, Revenue, HSE).
59
The researcher agrees that a hybrid model of governance should be
developed and suggests that is should take traits from:
Agency Theory;
Stewardship Theory; and
Stakeholder Theory;
to form a suggested model of governance for charitable organisation.
In this new model of governance, the researcher is suggesting that
compliance, partnership and stakeholder engagement are the three pillars of
organisational management.
The researcher is suggesting that:
Owners’ and managers have different interests: Owners are interested
in overseeing the operations and ensuring that those who have
operational authority are held accountable for their work.
‘Owners’ and managers share interests: There is a common
understanding of the mission and strategy of the charity and all are in
agreement as to what that is. This will assist with avoiding ‘mission
drift’.
Stakeholders have different interests: Service users, members, and
funders interests need to be tended to by ensuring there is appropriate
engagement and reporting within the organisation. A large membership
organisation will have a much higher level of engagement with their
members and its membership will demand an ‘ownership’ of the work
of the organisation.
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This hybrid model will satisfy:
Conformance:
Safeguard ‘Owners’ interests.
Oversee Management.
Check Compliance.
Improve performance:
Add value to top decisions/strategy.
Partner/support management.
Political:
Balancing stakeholder needs.
Make Policy.
Provide adequate control over the executive.
The researcher found that a common theme from the interviews was the need
to have a balanced board that had independent expertise but that each board
member must have a connection to the mission and values of the charity.
There was universal agreement that individuals who do not have a connection
to the mission and values should not be on the board. The suggestion of
boards having autonomy to recruit or co-opt individuals to their membership
was common and that recruitment of board members should be based on an
agreed competency and skills matrix to ensure that an appropriate balance is
achieved.
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6.6 – Summary of Findings
Charities are typically organisations that were founded by a person or a group
of people who have identified a gap in the social or state services within their
communities and they are trying to fill this gap. From the data gathered, the
researcher has identified that there are concerns on a number of fronts from
individuals from within the sector. The concerns can be categorised into two
over-arching themes:
1) Ability to comply.
2) Ability to change.
The compliance theme considers issues such as resources (financial, human
and systems), while the change theme is essentially about the changing roles
of boards and trustees, behaviours and the reassurance that charities are not
going to be transformed into top-heavy bureaucratic entities. Charities, by
their very nature, are responsive organisations that want to do whatever they
can to realise their mission.
The acceptance and welcoming of formal regulation from within the sector is
evident in the research data and demonstrates a sector that wants to do what
is right and support the building of public confidence. The sector understands
that a breakdown in confidence has the potential to lead to very damaging
effects and what this translates to, is a reduction in state funding and public
generosity. MaGuire (2019) states that, in Ireland, the annual turnover of
charities is €14 billion. Approximately €7 billion is provided through state
funding with the remainder being raised and earned by the organisations
themselves. This resource is overseen and under the control of 50,000
voluntary directors/trustees. Damage to public confidence in the management
of this sector could have catastrophic consequences.
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Chapter 7 – Conclusion
This research was an exploratory study to understand the challenges
encountered by Irish charity organisations with implementing good
governance standards. From the beginning of this report, the researcher
noted the positions of trust that charities hold in society and how the general
public expects charities to demonstrate the highest levels of governance while
delivering their services. The public insists that the money that is provided
through both central government and private donations, is used with financial
probity and to further the aims of the charity.
This thesis aimed to gain an understanding of what the challenges are for
charities who are aiming to be compliant with their regulatory obligations and
to identify possible solutions to these challenges. The regulatory burden was
noted a number of times during the research study and will be an ongoing
challenge into the future for organisations to overcome.
Given the complexity of the sector and the difference in the scale of some of
the charitable operations, it is difficult to make generic recommendations that
are suitable for all organisations to support meeting the governance
requirements. The below however, based on the research date gathered, go
some way to considering how initial steps can be taken to address concerns
and challenges.
7.1 – Recommendation 1
Boards/governing committees to adopt the Governance Code.
(Individual Organisational Control)
Each governing body needs to formally adopt the governance code and
develop a plan that will guide them through the journey to compliance. This
resolution needs to feature on the agenda of all board/trustee meetings to
63
ensure that organisations are monitoring their agreed plan so they will be
reporting to the CRA on compliance levels by 2021.
7.2 – Recommendation 2
Charities to clearly state their mission and public benefit. (Individual
Organisational Control)
Charity boards/trustees need to reflect on their objects and aim and ensure
that:
a) they are still relevant to today’s society and;
b) that they are actually doing what they say they are and avoiding
‘mission drift’
7.3 – Recommendation 3
Streamlined reporting for charities. (State supported)
Organisations are raising the issue of the administrative burden regarding
annual reporting. It is recommended that a single system of reporting for
charities be introduced and that covers all aspects of the regulatory filings and
returns required from the state. Organisations will find it difficult to introduce
leaner structures if they have to continue replicating the same work.
7.4 – Recommendation 4
Online training/licencing for directors/trustees. (State supported)
64
The skills and qualifications of directors/trustees were a big concern coming
from the data collection and the fact that lots of individuals did not understand
the extent of their responsibilities. The researcher is recommending that an
online training and licencing portal is developed so, those who are being
generous with their time and volunteering to become directors/trustees, can
undergo a training module and get ‘licenced’ to become a trustee. This would
ensure that those taking on the responsibility would fully understand their role
on the governing body.
7.5 – Recommendation 5
State funded shared services for charities. (State supported)
Charities are describing an increased financial burden as they move to comply
with regulation. The researcher is recommending the establishment of a
central shared services agency, from which charities could ‘draw-down’
expertise in matters relating to governing the organisation. A shared service
facility could be considered an extension of the CRA or LGMA without having
to create a new state entity.
It is clear from the desktop research and data gathered through the study, that
the Irish ‘third sector’ is strong and holds a central place in society. The
individuals that hold the responsibility of maintaining this trust, have a
significant responsibility to ensure that the organisations, that fill so many gaps
in social services, operate the highest standards of governance to provide
reassurance to the public that their generous support is managed
appropriately.
65
Chapter 8 – Limitations
The potential limitations of this study that the researcher has identified are:
8.1 – Lack of Previous Research
There is a significant amount of research on the topic of corporate governance
in for-profit entities and financial reporting in charities, but the concept of
charities regulation is a relatively new phenomenon thus is was challenging to
acquire significant level of journals. To offset this limitation, the researcher
personally contacted a number of academics from other institutions and
consultant authors from within the sector to request copies of their studies and
work, which they generously provided.
8.2 – The Global View Taken of Irish Charities
For this study they researcher took a global view of the Irish charity and non-
profit sector. This could be further narrowed to the specific specialities from
within the sector (Early Years, Youth Affairs, Justice, Health, etc.) in order to
obtain a more defined set of challenges being faced by ‘sub sections’ of the
third sector. The researcher presented the findings as global challenges and
used a broader sample of interviewees to gather data from rather than relying
on one sub-section.
8.3 – Time Constraints
As the researcher was conducting the interviews and focus group during ‘peak
summer time’, it was more difficult than anticipated to schedule the interviews.
The researcher was flexible with attending meetings and offered to travel to
the interviewee’s choice of location at a mutually convenient time. The
researcher had aimed to conduct twelve interviews but failed to find a mutually
66
agreeable time for two participants and one declined to participate. Some of
the venues were not ideal for a study of this nature and background noise was
a distracting issue for two interviews in particular.
8.4 – Personal Bias
The personal bias of the researcher was a concern throughout this study due
to his involvement with governance projects in his two most recent
employments at senior level. Particular consideration was given by the
researcher to ensure that issues that he had faced with serious governance
failures did not steer the research in a particular direction.
8.5 – Focus Group
The focus group consisted of seven individuals whom had been Regional
Manager (CEO equivalent) for less than two years. While each Regional
Manager has extensive experience elsewhere working at senior level in
charitable organisations, their experience in their current role was limited.
Each of the Regional Managers was leading a major governance restructure
of their respective organisations, so their lack of time in the role was offset with
their real-time experience of governance challenges facing their organisations
in a restructure.
While the researcher addressed the possible impact of the limitations, he
would recommend that any future research should consider these limitations
and in particular limitation 1 and 2.
67
Chapter 9 – Recommendations for Further Study
Given that the formal regulation of charities and non-profits in Ireland is such
a recent phenomenon, in the coming years there will be a significant
requirement for evidence based research on whether the impact of this
regulation has been translated into organisational benefits in terms of
enhanced capability and service provision for the end user of the services.
It would be useful for the sector, with a turnover of over €14 billion develop a
value for money report. Organisations that fill the gaps of the social services
of the state on a daily basis should be able to clearly demonstrate their
financial value to the state.
The ‘regulatory burden’ or ‘cost of compliance’ were common topics
mentioned during the interview stages of this research and this cost is
challenged by the CRA. Organisations claiming that these costs exist and
are impacting their work need to conduct some detailed research and
demonstrate the actual cost that they have incurred with becoming compliant
with regulation.
It is clear from this research that funders (public and private) are demanding a
higher level of reporting on charitable activities. The development of an impact
study for these activities would be useful to gather demonstrable evidence for
the work that is being done to fill the gaps of state services.
The sector is busy doing the work that its organisations do, to keep the
services they run open. The sector will be depending on academic
organisations, supported by advocacy networks to develop future studies. It
is unlikely that individual organisations will be able to conduct this research
unaided.
68
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Appendices
Appendix 1 – Charity Statistics Infographic
Figure 6: CRA 2018 Annual Report Statistics
76
Appendix 2 – Research Participants
One to One Interviews
Participant
Ref: Gender
Highest Education
Qualification
Current/Most Recent
Role
A M
Primary degree and &
various Postgraduate
Diplomas
Freelance mentor &
advisor to multiple
charities.
B M
Honours Degree, 2 post
Grad, Diploma in
Corporate Governance,
Chartered Director
Chairman of a Voluntary
Hospital.
C F Master’s in Regional
Urban Planning
Senior Manager
Communications &
Information of a National
Charity.
D M
Master’s in Voluntary &
Community Sector
Management
HR & Volunteer
Manager of a National
Charity.
E M Chartered
Accountant/MBA
Governance Author,
CEO Governance
Consultancy.
F M
Master’s in Law &
Master’s in Applied
Social Studies
Deputy Director of a
National Charity.
G M MBA Director of Advocacy of
a National Charity.
H M MSc & MBA CEO – State Regulator
J M Bachelor of Arts &
Advanced Diploma
CEO of a National
Charity
77
Focus Group – Senior Management Group from a National Non-Profit
Network
Participant
Ref: Gender Years in Current Role Current Role
A M 1.5 Regional Manager
B M 1 Regional Manager
C F 5 Regional Manager
D F 1 Regional Manager
E F 1.5 Regional Manager
F F 7 Regional Manager
G F 12 Regional Manager
78
Appendix 3 – Pilot Interview Questions
1. What are the major concerns you see regarding the formal regulation
of Charities in Ireland?
2. How widely do you think these concerns, or others, shared across the
sector?
3. How has the lack of regulation within the charity sector until recent
times led to the development of ‘questionable practices’ within
organisations?
4. Given the reporting requirements that are now in place, what do you
perceive as the factors that continue to lead to the variation from the
expected level of good governance?
5. What has been the difference to the delivery of services by the
Charities since the introduction of formal regulation?
6. How can charities balance their regulatory responsibilities while
ensuring their services are delivered in a consistent way?
7. What is standing in the way of charities meeting their full governance
responsibilities?
8. What are the top four traits that the public expects charities to
demonstrate?
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Appendix 4 – Final Interview Questions
1. Examine the nature and extent of the concerns of regulatory
implementation in the Irish charity sector.
1.1. Since the concept of the regulation of Charites was introduced, what
have been the concerns raised by organisations from within the
sector?
1.2. How widely do you think these concerns, or others, shared across
the sector?
1.3. Do the themes of the concerns vary based on the size of the
organisation (for example, do the concerns of an organisation with a
large turnover, staff team differ from an organisation that is solely
voluntary led and managed)
1.4. Have the concerns raised been addressed in recent years or are
organisations of the view that there are barriers to compliance that
they find difficult to overcome?
2. Identify and discuss the factors that lead to the variation in
governance practices in charities.
2.1. What in your view are the factors that have led or can lead to
governance failures within charity organisations?
2.2. Given the reporting requirements that are now in place, why do you
think we still hear stories about governance failures within charities?
3. Examine if the introduction of charity regulation correlates with the
better delivery of organisational services.
3.1. Has the implementation of charities regulation impacted on the
delivery of services? Positively or negatively?
3.2. How can charities create a balance with ensuring their regulatory
responsibilities are met but that a compliance agenda does not take
away from front line services?
80
4. Can a theoretical framework be defined to state what the optimum
model of governance is for charities?
4.1. Is it important that organisations strike a balance of independence,
expertise and connections to the mission of the charity with the board
members? And if so, how difficult is it to achieve this balance?
4.2. What do you think the level of independence of boards should be
from the operations of the organisation?
4.3. What is the one single thing a board can resolve to do, to ensure it is
promoting the highest governance standards for the organisation?
4.4. What are the top four traits that the public expects charities to
demonstrate?
84
Appendix 6 – Participants Information Sheet
A research proposal to study the challenges of implementing good governance
standards in Irish charities.
Researcher: Noel O’Connor
College: National College of Ireland
Course: MSc. in Management (Level 9 QQI)
Rationale
There is a significant amount of research and theory available in the area of
governance and regulation for commercial entities, but this is a relatively new
topic in terms of charities, not for profits or the ‘third sector’. This research will
consider some of the key themes emerging as a result of enhanced regulation,
the factors leading to variations in governance practices and if the introduction
of formal regulation has led to the better delivery of services.
The Questions
The research will explore the challenges of implementing good governance
standards in Irish Charities by addressing the following sub-questions:
Q1: Examine the nature and extent of the concerns of regulatory
implementation in the Irish charity sector.
Q2: Identify and discuss the factors that lead to the variation in governance
practices in charities.
Q3: Examine if the introduction of charity regulation corelates with the better
delivery of organisational services.
85
Q4: Can a theoretical framework be defined to state what the optimum
model of governance is for charities?
Aim
To provide an evidence-based framework that can be used to support
addressing the concerns and challenges that are leading to challenges of
implementing good governance standards in Irish charities.
Ethical Considerations
Target Group and Methodology
Individuals who are in, or have been in, a senior management (professional or
volunteer) or consultant position in the Irish charity sector in the past five years
and have experience in implementing a governance framework.
The methodology employed will be semi-structured interviews.
Confidentiality and Anonymity
All participants will be anonymised, and any personal information will remain
confidential. Any information pertaining to organisations or places of work will
also be anonymised. The following information from each respondent will be
recorded.
Gender
Highest educational qualification obtained
Current position/most recent position in the Irish charity sector.
86
Protocol
The following protocols pertain to all participants:
You do not have to answer any questions that you do not want to.
You can choose to leave whenever you want.
You can terminate the observation at any time.
You can retract your statement at any time.
Non-Coercion / Inducement
No coercion or inducement will be applied to promote participation.
Participation is voluntary.
Time commitment
The duration of the interview will be approximately 45 minutes.
Audio recording
The interviews will be recorded on audio files and then transcribed. The audio
files will be deleted once the transcription is completed. The transcriptions are
required to be held until the results of the research have been finalised.
87
Appendix 7 – Consent Form
This research is approved by the National College of Ireland.
I have been informed of the purpose of my participation in this study and the length of time of required for the interview.
I understand that I can refuse to answer any question and can withdraw from the interview at any stage.
I understand that the interview is to be recorded, but will not be shared with any 3rd parties, kept in secured place and will be permanently deleted once the research is completed.
I understand that I can contact the researcher within two weeks of the interview to obtain a transcript of the interview.
I understand that I can redact, remove or alter comments from the transcript within one week from receiving a transcript by email.
I have read and fully understand the purpose of this research and consent to participant.
Please sign below:
Consent
I CONSENT/AGREE to participate in this research project:
Signed: __________________________
Print Name: __________________________
Date: __________________________